This morning, February 23rd, the Federal Reserve Board (FRB) and the Office of the Comptroller of the Currency (OCC) issued guidance explaining how supervisors should examine compliance with minimum variation margin requirements for non-cleared swaps and non-cleared security based swaps.

The guidance explains that the FRB and the OCC expect swap entities covered by the rule to prioritize their compliance efforts surrounding the March 1, 2017, variation margin deadline according to the size and risk of their counterparties. It goes on to explain that swap entities' compliance with counterparties that present significant credit and market risk exposures is expected to be in place on March 1, 2017, as laid out in the final rule. For other counterparties that do not present significant credit and market risks, the agencies expect swap entities to make good faith efforts to comply with the final rule in a timely manner, but no later than September 1, 2017.

The Farm Credit Administration, the Federal Deposit Insurance Corporation, and the Federal Housing Finance Agency also administer the final rule for institutions under their jurisdiction, but currently have no swap entities affected by this guidance. However, they support the guidance issued by the FRB and the OCC.

The release of this guidance directly follows a meeting that SFIG held with the CFTC and prudential regulators yesterday, February 22nd, to discuss our recent request for temporary relief for legacy securitization transactions from the compliance date for variation margin requirements.